An implicit cost is:

• A. the opportunity cost of using resources owned by the firm for which no direct payment is made
• B. a payment made by a firm to purchase raw materials
• C. the explicit monetary expense recorded in the firm's financial statements
• D. a tax paid by the firm to the government

Answer: (A)

Verified step by step guidance

1. Understand the concept of costs in microeconomics: costs can be explicit or implicit. Explicit costs involve direct monetary payments, while implicit costs represent opportunity costs without direct payments.
2. Define explicit costs: these are actual out-of-pocket expenses recorded in the firm's financial statements, such as payments for raw materials or wages.
3. Define implicit costs: these are the opportunity costs of using resources owned by the firm, where no direct payment is made. For example, the income the owner forgoes by using their own building instead of renting it out.
4. Compare the options given: identify which one describes a cost that does not involve a direct payment but reflects the opportunity cost of using owned resources.
5. Conclude that the implicit cost is best described as the opportunity cost of using resources owned by the firm for which no direct payment is made.